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  • VAT refund backlog and additional zero-rating

VAT refund backlog and additional zero-rating

21 February 2019

Ayanda Masina, Senior Consultant, Indirect Tax, BDO SA |

Delayed VAT refunds by SARS impacts many taxpayers, especially their cash flows. The Minister today announced that SARS decreased its credit book from R41.8 billion to R31 billion through paying overdue VAT refunds by end of January 2019. Although a substantial amount of outstanding VAT refunds remains due to Taxpayers, this is a step in the right direction by SARS!

The VAT rate increased to 15% in April 2018 and placed a severe financial strain on lower-income households. Treasury, in an attempt to provide some relief, added more items to the list of zero-rated items, albeit contrary to the Davis recommendations. The items added to zero-rated basket are white bread flour, cake flour and sanitary pads. The zero rating of sanitary pads is a welcomed addition. It does, however, begs the question this benefit will reach the poorer communities.

Clarification of VAT implications on various supplies

Treasury undertook to consider and clarify the VAT implications of the following:

  • Including in the scope of financial services, the transfer of long-term reinsurance policies;
  • Aligning the provisions of the VAT Act and the Insurance Act;
  • Refining the VAT corporate reorganisation rules, especially relating to the transfer of fixed property, other than as a going concern;
  • The provisions of section 72 of the VAT Act, which mainly deals with situations which are not adequately catered for in the VAT Act, due to the manner in which the business is conducted; and
  • Clarifying the VAT treatment of foreign donor-funded projects, especially in case of sub-contracting.

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